PayPal and the French tax authorities: how does it work?
PayPal is an electronic payment service for sending and receiving money in transactions with private individuals, for payments to merchants on eBay and other online sales sites.
As PayPal Europe is a Luxembourg-based financial institution, a PayPal account is legally considered to be a foreign account. In principle, any account held abroad must be declared to the French tax authorities, on pain of sanctions (fines, penalties). However, under certain conditions, the tax authorities have waived this requirement for most PayPal account holders residing in France.
Foreign accounts: mandatory declaration
What the law provides for
Pursuant to article 1649 A of the CGI (French General Tax Code), the holder of a foreign account in 2016 is required to declare it to the French tax authorities at the same time as his or her tax return. tax returnin April-May 2017. This principle applies regardless of whether the account is used for personal or professional purposes.
For each account, the taxpayer domiciled in France must provide all the following details:
- name and address of the institution opening the account
- account designation: number, nature, use and type of account (e-money account, bank account, savings account, term account, etc.)
- date account opened or closed during the past year
- surname, first name, date and place of birth, address of account holder or representative
Declaration with or without Cerfa 11916 form
These items can be declared either on plain paper, or using the declaration form n°3916 (Cerfa form 11916). These details must be repeated each year when completing the annual tax return. In addition, box 8UU dedicated to "Accounts opened, used or closed abroad" must be ticked.
Please note that these formalities apply to all members of the tax household, as well as to persons who have been attached to the household (such as adult children who are still studying). Likewise, all taxpayers are concerned, whether or not they are taxable.
Penalties for failure to declare
In the event of non-declaration, a fine of 1,500 euros is payable per non-declared account. Above a total of 50,000 euros in assets (in one or more accounts), the fine per undeclared account is equal to 5% of the credit balance, with a minimum of 1,500 euros. Penalties may be added to these fines: taxation of undeclared assets, with a surcharge of 40% applied in the event of omission.
PayPal account: no obligation to declare, subject to conditions
In the majority of cases, holding a PayPal account is not subject to the declaration obligation laid down by law. This is the consequence of the advice given on November 12, 2013 by the Direction générale des finances publiques (DGFiP) on the issue, shortly after a decision by the administrative court of Pau which had condemned an antique dealer for failure to declare his PayPal account.
Thus, according to a note published in the BOFiP-Impôts (the official tax bulletin), the obligation to declare an account held abroad does not apply provided the following three cumulative conditions are met:
- the account is used to make online payments for purchases or collections in connection with the sale of goods
- this payment services account presupposes the holding of another account opened in France, to which it is linked
- the total amount credited to the account as a result of sales made by the account holder is less than or equal to 10,000 euros per year.
If these three criteria are not met, the exemption from obligation does not apply. In this case, the holder must comply with the reporting formalities required by law.
Is money in a PayPal account taxable?
In fact, the taxable event is not linked to money transfers or to the balance held on a PayPal account. It arises from the activity that generates the financial flows passing through the account.
Several situations may then arise:
– Non-taxation : use of the PayPal account for personal or family purposes, e.g. to resell second-hand goods (a bed, knick-knacks, toys, etc.) from time to time on Le Bon Coin, for example. In this case, it's not a paid extra-professional activity.
– Taxation : use of the PayPal account for a remunerated activity (e.g. sale of do-it-yourself items). In this case, income must be declared as non-commercial profits (BNC) for an occasional activity, or as industrial and commercial profits (Bic) for a regular activity. In this case, there are different declaration procedures, depending on the nature of the activity and the amount of sales generated.